In a suite at Microsoft’s headquarters in Redmond, Washington, Shannon Lof­tis is breathlessly jumping up and down, ducking and weaving as she negotiates an on-screen obstacle course, with a video-game avatar following her every movement.

She is demonstrating one of the titles developed by her team for the “Project Natal” controller – a motion-based peripheral that Microsoft hopes will not only mimic the actions of its players but also the success of Nintendo’s Wii motion controller.

The Wii had early problems with over-energetic players letting controllers fly out of their hands and smash television sets. But there is nothing to hold in Microsoft’s version. A unit containing a camera, microphone and sensors under the TV translates every movement to the screen.

“I’ve hit my head on a lamp and there’ve been knuckles bumping into walls, but there has been nothing that has required first aid,” she says of the testing procedure.

Microsoft has already been bruised enough by Nintendo. The Wii was launched a year after the Xbox 360 but has become the clear leader in the current generation of consoles, with more than 70m units sold to date, compared with 40m for the 360.

Microsoft is launching its motion product late this year, four years after the Wii, and so it is spending big on marketing to try
to catch up. That effort begins in earnest with a push at E3, the video game industry’s biggest trade show, in Los Angeles this week. A specially commissioned performance by Cirque du Soleil will highlight in artistic and grandiose terms the controller’s possibilities.

“We felt very strongly from the first time we tried the game that this was not only about the history of gaming but also about the history of civilisation and how we relate to machines,” says Michel Laprise, Cirque’s conceptual director for the show.

Microsoft hired Rob Matthews last year, the man who launched the Wii for Nintendo in the US, as its head of consumer marketing. He says Microsoft’s controller will help to change the “mass consumer perception” of the Xbox 360 that it focuses on hard-core gamers.

Consumers will be urged to try the controller at stores and events around the country, and there will be extensive use of social networking tools.

Sony’s rival Move controller, which, like Natal, was first shown at E3 a year ago, takes a different approach. Its camera interacts with controllers that feature coloured bulbs, a set-up that aids more precise detection of the player’s movements.

“Hard-core gamers have looked down their noses at motion gaming . . . because it’s not terribly precise or challenging,” says Peter Dille, head of marketing for Sony PlayStation in the US.

Move will satisfy both hard-core game players and families who want to play social games, he says.

Sony will also test the appeal of 3D games at E3. These have been made possible by the 3D-capable TVs it is launching and a software upgrade to the PlayStation 3.

The Japanese company could face problems encouraging third-party developers to produce their games in 3D, according to Grady Hannah, head of business development for Darkworks, a 3D gaming technology company.

“It’s not trivial to make a game with 3D compatibility and, at the moment, less than 5 per cent of your potential players are going to have the equipment to see it,” he says.

Nintendo could make an impact at the E3 show showing off a 3D version of its DS handheld console, which will not require special glasses.

“I think Nintendo is going to steal the show with the 3DS,” says Michael Pachter, video game analyst with Wedbush Morgan Securities. “It’s truly novel and I think it will catch people’s imagination.”

Both the latest motion controllers and 3D are forerunners of features in the next generation of consoles, according to Yves Guillemot, chief executive of publisher Ubisoft.

“Better interfaces and the use of 3D will lead us to the future of consoles, where we will be easily interacting with the screen and everybody will be able to play,” he says.

His utopian vision aside, such developments could bring in a new generation of players and give a major boost to a video game industry currently suffering one of the biggest sales slumps in its history.

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